When buying a new home, you will hear the term escrow used over and again. There can be some confusion, as at different points of a real estate transaction, it can have different meanings. The definition describes escrow as “documents or other items of value, held by a neutral third party, to be used by or given to another party at a later date, to fulfill a commitment or obligation. We will now explore two of the points in a transaction you will hear the term escrow and what it means.
Your first exposure to the word escrow will be at the start of the purchasing process. This will be with your earnest money deposit when you first make an offer to buy your new home. The funds go into a trust account of a third-party and is returned when the transaction closes or in some previously agreed method if the purchase fails to go through.
Another possibility is when you come across the term escrow agent. This title describes the person or company who will keep all funding and documents related to your home purchase until the final day when the transaction is complete. This can be the law firm or attorney you hired to close your transaction or rarely, another individual.
There are several other points in the process you will come across the term escrow, but will largely depend on the specifics of your mortgage.